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There’s Added Event Risk Today (Twice)

Hello, Friends. We have a couple of extra features today, in the form of potentially important, and market-moving, speeches by Fed Chair Yellen and European Central Bank President Draghi. Dr. Yellenâ€™s speech will be delivered at a breakfast, 10 AM EST, while Dr. Draghi waits until the dessert plates are brought in, at 2:30 EST.

Both speeches will be delivered at the Jackson Hole conference, an annual event sponsored by the Kansas City Fed. It is attended by senior policy makers and economists, and has been the venue in the past for major policy statements. This yearâ€™s topic is the labor market, and since employment is believed to be a key to the Fedâ€™s current deliberations as to when to start raising short term rates, it will be closely observed.

The ECB is facing a European economy that appears to be stalling, with even stalwart German GDP moving into negative territory during the second quarter. There may be some hints as to what additional measures to stimulate growth the regionâ€™s central bank is considering; Dr. Draghiâ€™s remarks could have a sizable impact on the Euroâ€™s exchange rate.

In order for all market participants to have access to the remarks more or less simultaneously, even those not fortunate enough to be invited to Wyoming, I expect that the texts of the speeches will be provided to the major wire services. They will be embargoed until the scheduled time, so we should start seeing headlines as the speakers step up to the podium.

Thereâ€™s no way to determine with any confidence what the central bankers will say, or how the markets will react. It is important to be aware that there could be some volatility associated with their comments, and while I may set up trades along the lines that Todd Mitchell teaches as the â€œfirst fifteen minute/half hour breakoutsâ€ to take advantage of sharp moves, I intend to be otherwise flat in the E-minis. With regard to currencies, I plan to remain short EUR/GBP into Dr. Draghiâ€™s speech, with a stop above .9035.